Peso, stocks seen to improve by yearend

Despite reaching a record closing low of P56.45 to the dollar last Monday, the local currency is seen to stabilize at the P56:$1 level by the end of the year on the strength of higher remittances from overseas Filipino workers, a top bank executive said.

Adelbert A. Legasto, senior vice president and head of the Bank of the Philippine Islands’ asset management group, added that the Philippine Stock Exchange stock index (Phisix) is expected to challenge the 1,900-level, after recently breaking the 1,700 psychological ceiling.

"Historically, the peso always moved or weakened in the vicinity of one percent as September is the start of the import season," Legasto said during the formal launching of the Philippine Index Fund (PIF) at the PSE Plaza in Ayala.

Manufacturers, exporters and importers, including oil companies, start building their inventories in the third quarter of the year ahead of the Christmas season. Oil prices generally increase during the last quarter and the first quarter due to the cold season.

In fact, the BPI executive insisted that the Philippine peso even did better than the normally-stronger Thai baht which weakened by more than three percent this year.

The BPI official added that the Phisix’s 1,900-level would be challenged within the year after it broke the 1,700-psychological ceiling months back. Early this month, it is making strong overtures that it might challenge the 1,800-barrier.

"Coupled with the stronger confidence of foreign fund managers who invested P1.7 billion in the month of September alone, the index is moving on to challenge the 1,900-level," the BPI asset manager said, adding that it was "not only a possibility but more of an inevitability."

The whole of 2004 saw the Phisix move up to its present level. "The index is poised to target the 1,980-level this year, and the next resistance level or ceiling would be at the 2,260 zone," he said.

However, the BPI unit agreed that breaching the 1,900-level and moving to the next phase depends on how the fiscal decifit problems are addressed by the National Government, as well as the perception of foreign investors.

He said government must show improved fiscal deficit management, the proposed revenue-generating measures are passed into law, and strong corporate earnings are realized. These, in turn, should serve as a strong magnet for new foreign net inflows while allowing for the stability of the peso.

As early as July, BPI declared that the bear market has bottomed out as was confirmed with a 20-percent performance in June. "We have broken out of the bear market trendline," Legasto said then.

The BPI senior vice president said that after breaking the 1,700 barrier within the year, it will hit "probably 1,900 within the first semester of 2005."

In the short-term, there will be minor corrections as profit taking continues but it will turn bullish in the long term, he added.

Foreign investors have started shifting into a net buying position after a brief period of watching in the sidelines, and a prolonged period as net sellers, as seen from its over P1.7-billion buying spree this month against the average turnover of P500 million in the past six months.